The prospect of a Brexit could create economic paralysis, writes Tony Ward, chief executive of Clayton Euro Risk.
I’m struck by the sheer volume of media coverage of the EU referendum. ‘Should we stay or go?’ the headlines cry. With so much rhetoric ringing out from both Leave and Stay camps I think we’re all heading for information overload sooner rather than later – and there’s still over two months to the actual vote.
But one point that increasingly concerns me about the referendum is the need for ultimate certainty. Whether we vote to stay or uncouple ourselves from Europe, it’s not so much what we say as how loudly we say it.
Already the Brexit vote is undermining the normal functioning of our economy and commercial organisations. Most indicators suggest that UK businesses are feeling increasingly nervous while the economy itself is heading for a slowdown.
Take for example the UK’s dominant services sector: the latest Markit/CIPS services Purchasing Managers’ Index (PMI) shows it weakened in
February, registering its slowest rate of growth for nearly three years. Markit chief economist Chris Williamson said: “Survey responses reveal that firms are worried about signs of faltering demand, but boardrooms have also become unsettled by concerns regarding the increased risk of ‘Brexit’, financial market volatility and weak economic growth at home and abroad.”
Activity in the construction sector also slumped to a 10-month low in February with the PMI falling to 54.2. Markit’s Tim Moore blamed clients’ unwillingness to commit to new projects ahead of the vote.
Employment search engine Adzuna found that the number of jobs advertised online has fallen for the second month running, dropping by 7.3% in January. Doug Monro, Adzuna’s co-founder, linked the setback to the EU referendum: “A potential Brexit brings new unknowns into the jobs market. Politicians are at risk of fuelling uncertainty fears and only increasing doubts. By doing so they’re risking a weaker jobs market.”
It’s not surprising that corporate fears about a Brexit are coming to the fore. What’s worrying for the economy is that we may get stuck in some sort of paralysis until the referendum is over – or perhaps even after that.
The truth is that no one knows what will happen in a post–Brexit world. And there’s the rub. Confidence is falling and amid heightened uncertainties, businesses and transaction levels will suffer in the run up to the election. People will put off making meaningful decisions.
I feel this period before the election is just one we have to get through while sustaining as little collateral damage to the economy as possible.
Politicians can help by providing balanced insights and rejecting the infighting and infantile name-calling. Voters are already confused enough by politicians and are calling on the media to present the plain facts on Britain’s EU membership so they can make up their minds.
Whatever the final result, whichever way the nation votes, I hope for a strong, unambiguous decision.
Never mind in or out, the last thing we need is a 51%–49% split that leaves the spectre of a return to this debate on the cards. Whether in or out, let’s made it unequivocal – then we can go back to our day jobs.